Forging America: The History of Bethlehem Steel - Chapter 7

Bethlehem Steel Graphic Banner: Chapter 7

Lance E. Metz, historian for the National Canal Museum in Easton and an authority on Bethlehem Steel, says no other event had as much impact on the social environment of the Lehigh Valley. The strike and its settlement allowed the steelworkers to get something they had wanted since 1940: a decent quality of life and the promise of cradle-to-grave security.

And, Metz says, because other big local industries considered Bethlehem Steel the pacesetter for the entire Valley, the settlement inadvertently led to a better quality of life for workers at Mack Trucks, Air Products and Chemicals, Western Electric, Dixie, Ingersoll-Rand and other area industrial companies.

But the long, severe strike had also opened a path that would lead to ruin. Because American companies didn't make steel during the strike, U.S. manufacturers turned to foreign steel out of necessity. Those manufacturers soon found that steel made in other countries was of a higher quality than they had been led to believe, and it was cheaper. Ships were lined up outside Philadelphia for miles to bring in steel from other countries.

Foreign steel imports exceeded 5 million tons in 1959, its highest level to that point. That number would double in the next six years, as some customers never returned to buying domestic steel and others cut back on it, even after the steelworkers returned to the mills.

The new labor contract that U.S. steelmakers took on made it more difficult for them to compete with the new stream of foreign steel.

Jim Cox's father, John L. Cox, was the chief engineer at Midvale Steel, Bethlehem Steel's biggest competitor in the armor-piercing shell and gun business. Jim grew up listening to his father complain about Bethlehem Steel. But when Jim was receiving offers from Bethlehem Steel, U.S. Steel and other companies as an engineering graduate of the University of Pennsylvania in 1939, his father noted that Bethlehem Steel was a better-managed company and offered a broader field than U.S. Steel.

By 1959, however, the well-managed company that Cox's father lauded was making questionable decisions.

Jim Cox thinks the past practices clause and the lack of flexibility it caused Bethlehem Steel hurt the company's overhead and gave more ammunition to mini-mills. He wondered how Bethlehem could improve its operation and cut costs when the past practices clause prevented it from making changes and improvements.

But as long as the steel industry could keep raising prices, there wasn't any compelling need to cut costs and streamline operations. The profits kept coming anyway.

Just as Bethlehem Steel was celebrating $80 million in profits the first half of 1960, Eugene Grace died in his Prospect Avenue home on July 25. He was 83.

Under his tutelage, The Steel had grown so big that it had more police officers than the city of Bethlehem. It paved Bethlehem's streets, plowed its snow and helped build Bethlehem's water system, the best in the Lehigh Valley.

To mark his funeral, flags flew at half staff all over Bethlehem. The steel plant's machines fell silent for two minutes. A fleet of limousines carried dignitaries to Packer Memorial Church at Lehigh University, where Grace had studied and played baseball in the 1890s and served as president of the board of trustees from 1924-57. Among the mourners were David Rockefeller, vice chairman of Chase Manhattan Bank, and U.S. Steel Corp. President Leslie Worthington.

The Rev. Elam Davies of Bethlehem's First Presbyterian Church said Grace's will was ''indomitable without being inflexible.'' Benjamin Fairless of the American Iron and Steel Institute cited his ''invaluable services to industry.'' Earle W. Bader, president of the Bethlehem Chamber of Commerce, declared that ''future generations will rise up and bless him for his unselfish services to the city.'' Local USW union leader Wadolny lauded him as ''a worthy and honorable opponent.''

With that, Grace was taken to his tomb at Nisky Hill Cemetery.

Just as one era was ending for Bethlehem Steel, a new one was beginning for the nation with the election of John F. Kennedy as president in 1960.

Kennedy was an internationalist. He believed the future was in free trade and open markets. Where steelmakers were traditionally protectionist, calling for high tariffs to keep foreign steel out, Kennedy wanted to encourage global competition.

Steel industry leaders never bought Kennedy's claim that he wasn't opposed to business. Arthur Schlesinger Jr., the Harvard University historian and Kennedy adviser, says in his memoir of the administration, ''A Thousand Days'':

''Though (businessmen) doubtless admired Kennedy's intelligence, were impressed by his knowledge and were generally conciliated in his presence, they felt he stood at a distance from them. The fact remained that he was outside the business ethos, that he did not regard the acquisitive impulse as man's noblest instinct, nor the pursuit of profit as man's highest calling.''

Ultimately, Kennedy clashed with the steel industry over prices. Fearful that a round of steel prices and wage increases might lead to inflation, Kennedy in September 1961 wrote to the industry's leaders. He told them that because steel was ''a bellwether as well as a major element in industrial costs,'' he would urge that they ''forgo a price increase.'' He then wrote to steelworkers union head David J. McDonald, asking that wage demands be kept ''within the limit of advances in productivity.''

Early in 1962, Secretary of Labor Arthur Goldberg, who had been general counsel for the steelworkers union, negotiated a settlement between the union and the steel industry.

On April 10, four days after the agreement was reached, a reporter at the annual Bethlehem Steel stockholders meeting in Wilmington, Del., asked company President Edmund F. Martin if the industry intended to raise prices.